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Personal Liability Coverage E in Homeowners Insurance

Personal liability insurance is a type of coverage that protects your assets in case you are found liable for something. It is typically included in most homeowners insurance and other residential policies such as renters and condo insurance. You can also buy it separately as a standalone policy.

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Personal liability insurance is included in a homeowners insurance policy under Coverage E. The purpose of this section of coverage is to provide the homeowner with protection in the instance that there are any major injuries on the property or legal bills that arise from something that the homeowner was found to be at fault for.

Key facts
  • Personal liability coverage protects the homeowner from any claims that are a result of injuries or damage to other people or property where the homeowner is found to be at fault
  • Personal liability coverage typically has fairly high protection limits, but additional coverage can be purchased through policies like an umbrella policy
  • Legal bills as the result of a lawsuit from an injured person would be covered under the personal liability insurance section

What is personal liability insurance?

Personal liability insurance is insurance that is designed to protect a homeowner from claims that may arise against them or a member of the household for injuries or damage to another person or their property. This section of coverage will help the homeowner pay for any legal fees or medical bills that are placed on them for something for which they are found to be at fault.

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It is important to note that personal liability insurance only provides protection for an injury or damage to another person that is not the homeowner or a member of the homeowner’s household.

What does personal liability insurance cover?

This section of coverage covers many common types of injuries or damage that occur to visitors at a home. Generally, this section covers:

  • Lawyer fees to defend the homeowner
  • Major medical bills
  • Payments to repair property damage
  • Payments for damages caused by another person in the homeowner’s household
  • Payments for damage caused by the homeowner’s pets

 Some specific examples of when this coverage kicks in include:

  • The homeowner’s dog bites a visitor
  • The mail person slips and falls on the porch or is otherwise injured while delivering mail
  • The homeowner’s child leaves a burner on and accidentally starts a fire that damages part of a neighbor’s house

Something important to note is that the coverage provided to a homeowner under personal liability insurance doesn’t just stop at the end of the homeowner’s property. Coverage can extend to incidents that don’t occur on the property and legal fees or other expenses that are incurred off the property as the result of a covered claim.

What is not covered by personal liability insurance?

There are a number of instances where personal liability insurance will not cover injury or damage to another person’s self or property. These instances include:

  • Intentional damage caused by the homeowner to someone else
  • The homeowner accidentally causes injury or damage to someone with their car (covered by car insurance)
  • Damage or injury to someone as the result of a business activity taking place at the home (unless that business has to do with renting out the space)

Most importantly, if the homeowner is not found to be at fault, the injury or damage will not be covered under this section of coverage. Coverage F (medical payments to others coverage) will provide protection to the homeowner in that instance.

Personal liability insurance coverage limits

The typical personal liability coverage limits in a standard home insurance policy range from $100,000 to $300,000. For some, this may be a comfortable number, but these limits can quickly be reached in many severe injuries, damages, or even the loss of life. Some insurers may have limits as high as $500,000. Additional coverage can usually be purchased through what’s known as an umbrella insurance policy.

Umbrella Policies

Umbrella insurance policies are just that, an umbrella. These policies are designed to cover a person for any number of cases where they may be found to be at fault. They are encompassing personal liability policies that usually have higher limits. $1 million is the standard coverage limit that is purchased. These are good policies to further protect a homeowner. Umbrella policies are especially important insurance considerations for homeowner’s of higher net worth.

When considering one’s peace of mind, the homeowner should add up how much their home and all of their possessions are worth to determine what an adequate personal liability coverage limit would be. Normally, the incremental increase in premium cost is minimal to a homeowner as the coverage limit gets higher.

Here is an example of how an umbrella policy works. Say someone is injured on the homeowner’s property, the injured guest takes the homeowner to court and is ultimately awarded with a $750,000 claim against the homeowner. If the homeowner’s personal liability coverage limit is $300,000, that limit will be paid out first to cover the claim. If the homeowner does not have additional coverage, they would have to come up with the other $450,000 through their personal assets or some other means. If the homeowner had $1 million umbrella policy, that policy would kick in to pay the additional $450,000 with room to spare.

How much does personal liability coverage cost?

Increasing the limits of your personal liability coverage is surprisingly inexpensive. If you compare it with other types of coverage offered by the same company, you’ll find that the cost of increasing it doesn’t add much to the premium.

The main takeaway is that accidents can happen anytime. Being liable for even just one of them can place everything you’ve ever worked hard for on the line. If you want to protect your assets, make sure you’re adequately covered from personal liabilities.

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Kyle has extensive background in financial planning and financial writing. He is an expert in home, auto and life insurance. Kyle holds a Bachelor's degree in Business Administration from San Diego State University and multiple financial planning designations.
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